I had a fascinating conversation with a prospective client last week, and I wanted to share the gist of it.

Before our meeting my prospective client raised questions about return on investment via Wealth Spring’s factfind document. These questions weren’t posed about the return on investment from paying for financial advice but were instead about various aspects of his family’s lives that needed attention and investment. My prospective client wanted to understand my views on these topics, and we ended up in a partially philosophical conversation.

How do we measure the immeasurable?

In my view, things like health and education have an intrinsic value, spending time and money on these is worth it regardless of a potential financial benefit. Additionally, measuring return on investment can be challenging. Is the mechanism the long-term financial return, increased happiness, ‘feeling good’?

Even if we do identify the mechanism that we’ll use to measure return on investment, we can’t necessarily prove causality. For example: did your home’s value increase because of the improved kitchen, or was it a non-factor? Did your career earnings improve because you attended a particular course, or take a professional exam?

Should we measure the immeasurable?

But just because assessing the potential return on investment is difficult, it doesn’t mean that investing in those things isn’t worth doing. If we believe that investing in our health, education, careers, or homes will make us happier or improve our wellbeing, then if we can afford it, we should do it.

The challenge, and where financial planning fits in this conversation, is how to know if the associated costs of these immeasurable investments will affect our other goals, which do have direct financial outcomes.

How does financial planning enable the immeasurable?

For example, if the trade-off is between investing in your career or business, and saving money into long-term investments, then it pays to know where you might stand financially in the future if you don’t make further savings now. If you delay savings, then understanding how much you’d need to catch up can help focus the mind and help you to evaluate whether a particular investment is worthwhile.
Focusing on and investing in the immeasurable is key to a happy life. Good financial planning isn’t solely about the return on an investment, but about the important aspects of our lives we enable and nurture.

*Investments carry risk. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.